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Why Shares of Kandi Technologies Fell Over 10% This Morning

What happened

So what

Kandi's third-quarter earnings report was released before the bell, and it was a disaster. Revenue fell over 87% to just $6.4 million, and it lost almost $600,000 after making $2.3 million a year ago.

What happened? Kandi's primary business involves selling electric-vehicle parts to an electric-car joint venture it owns with automaker Geely Automobile Holdings (NASDAQOTH: GELYF). It's heavily dependent on subsidies provided by the Chinese government to spur the development of electric vehicles. But a big subsidy payment has been held up while the government investigates fraud allegations across the industry.

China's central government preceded a review on the subsidies paid to all the EV manufacturers, which caused the 2015 subsidy payments remain unpaid industrywide. The delay in subsidy payment heavily impacted the JV Company's production and sales, which resulted in a significant decrease in our EV parts sales.

The investigation has already borne fruit. In September, five of Kandi's rivals were fined and removed from the list of companies eligible for subsidies.

Now what

Hu said that Kandi has been working with government officials and expressed confidence that the subsidies will be paid "soon" -- but he didn't give a timetable. Meanwhile, he said, the company is working on new models for 2017 and gearing up for an initial public offering of the joint venture.

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